Spain's Cabinet delays approval of local gov't overhaul bill

Spain's national government said it would not approve a local administration overhaul bill during Friday's weekly Cabinet meeting and would analyze whether to appeal this week's European Commission ruling that declared tax breaks for Spain's shipbuilding sector between 2007 and 2011 to be illegal.

The secretary of state for public administration, Antonio Beteta, had said in recent days that the local government overhaul legislation would be approved Friday but, according to government sources, some minor points need to be ironed out before the final text can be sent to Parliament.

The government sources consulted by Efe said the bill would certainly be approved this month and likely during next week's Cabinet meeting.

According to the Spanish government's Web site, "the objectives for this law are to clarify municipal powers to avoid overlaps, define which powers correspond to which public administration service, how those services are provided and with what money."

The government has said that if the plan is approved by Parliament, which is controlled by the ruling conservative Popular Party, it will generate an estimated 7.13 billion euros ($9.34 billion) in savings between 2013 and 2015.

Spain is trying to reduce a high budget deficit and bring it in line with European Union mandates.

During the meeting, presided over by Prime Minister Mariano Rajoy, the government also will analyze a report presented by Industry Minister Jose Manuel Soria on this week's EU ruling on Spanish tax breaks for the shipbuilding sector.

In a ruling issued Wednesday, the European Commission required Spain to recover some tax breaks that buyers of Spanish-made ships enjoyed.

The EC said the tax advantages provided between May 2007 and 2011 to so-called economic interest groupings, or EIGs, that bought Spanish-made ships on behalf of maritime transport companies constituted illegal subsidies.

EU Competition Commissioner Joaquin Almunia said it was up to the Spanish government to determine which companies must pay back tax benefits, how to proceed to recover the funds and the amount to be reimbursed.

Tax breaks enjoyed between the start of the scheme in 2002 and April 30, 2007, when the Commission "publicly declared a similar French scheme incompatible," do not need to be paid back because during that timeframe there was legal uncertainty as to whether the Spanish scheme was compatible with the rules of the 28-member bloc, Almunia said.

The EC launched its two-year investigation in response to complaints from shipbuilders in other EU member states.

Some sectors in Spain, where the overall unemployment rate stands at a sky-high 27 percent, say the ruling could destroy tens of thousands of jobs in the shipbuilding sector.

Soria's report recommends the Spanish government appeal the ruling to the European Court of Justice and demand it be stayed pending the outcome of the appeal. EFE